[miked]

Everything is okay until you run into a situation like Finance1 described. And this has happened to everyone at some point I'm sure. Funders spend a lot of money on underwriters and cash flow analysis to determine the safest amount of money the merchant can afford to repay each month. Then another funder hops in a week later and doubles that amount. I have heard a lot of complaining in this industry about this and not enough suing. Strange, for an industry that is very litigious when it comes to merchants. So now that it may be funder vs. funder, funders are either not confident that their contracts and UCC-1s are perfected, they'd rather not spend the time and energy on it, they don't want their business to go through the scrutiny of the courts, or they don't want to create negative goodwill in the industry.

I know everyone hides their UCC-1s under aliases or doesn't file them at all to deter UCC hunters, but you may be shooting yourself in the foot when a stack funder comes along. They can claim that they did DD and argue that there was no public lien that prevented the merchant from secondary financing.

[MCA Pioneer]

Stacking, in my view, is very similar to a 2nd mortgage ... a smaller funded amount at a higher rate IF THE MATH MAKES SENSE. There is too much hysteria about this issue dating back years ago during my days as a Director at Advanceme. If one additional funding is added to a customer's overall debit load and the combined payments are an est. 17% or less of the average deposit volume, then it can make sense in many cases. The problem is when funders over-extend the customer with high payments and fees clearly placing the first pos deal at risk as well as their own second. I have long considered creating an association whereby one of the functions is to create "best practices" and see what percentage of the industry members might follow some sort of a formula to more appropriately apply second pos deals to a merchant.

Can you imagine if many of the first position mortgage companies demanded that their borrowers never obtain a second mortgage? They would be laughed at, and frankly that should be the attitude toward Advanceme, On Deck, Principis, and others when they demand to be the only funder in the mix. Again, it is about math and responsible funding.

This from Bob Gaskin, going into my 15th year in this industry and formerly a Director at Advanceme and the creator of the AMI Telesales Dept.

[jbrown]

Bob, you know better. 17% of total deposits? How many transactions did CAN/AMI do in all your years there? What does their data show about the maximum revenue split and the correlation to loss?

We all know that merchants mostly max out on a deal with the first position funder. Stacking is a short term game and not sustainable for most merchants.

All this blather about "2nd mortgages" overlooks the fact that mortgage lending is a REGULATED industry and there are strict guidelines about debt/income ratios in mortgage lending.

[achcash]

All this blather about "2nd mortgages" overlooks the fact that mortgage lending is a REGULATED industry and there are strict guidelines about debt/income ratios in mortgage lending.

And when Mastercard approves someone for a personal credit card, Amex, Visa and the rest don't come like hungry animals to give them more credit(regulated or not). Ye ok. It's a survival of the fittest game in a highly competitive industry. Anyone who is against stacking, like Jeremy Brown's company, I would bet heavily that is only b/c their credit facility doesn't allow them to do it.

[funding pro]

Bob, you know better. 17% of total deposits? How many transactions did CAN/AMI do in all your years there? What does their data show about the maximum revenue split and the correlation to loss?

We all know that merchants mostly max out on a deal with the first position funder. Stacking is a short term game and not sustainable for most merchants.

All this blather about "2nd mortgages" overlooks the fact that mortgage lending is a REGULATED industry and there are strict guidelines about debt/income ratios in mortgage lending.

Why even bother??? At this point it appears there are two groups of people in this industry. Folks that still think it is 2007, where we are providing financing to sub-prime business owners only and can say whatever they have to say so they can sleep better at night and then there are people doing meaningful business that see the big picture. As far as I am concerned its good vs evil and the line has been drawn. Sounds overdramatic just writing it out, but facts are facts. Opportunistic is just another way of calling someone greedy. Responsible stacking is an oxymoron. The responsible thing to do is educate, advise and implement the best strategy for the business owner. Not calling a UCC lead that was filed in the last 30 days to tell them you can get them funded on top of their advance, that it is "ok" and doesn't breach their current agreement and that everything will be fine since you've done it 1000 times before. All you can do is hope that as things continue to progress as they have and higher quality applicants continue to flood the marketplace the bottom end will continue to trickle out and take these folks with them. I cant see things going well when On Deck is doing a 24 month deal and 3 months in the business owner has 5 advances in place and wont qualify for a renewal for another 12 months...